In
recent years, several private foundations have gained prominence in the
media, and raised public awareness of their causes. Foundations, including
the Bill and Melinda Gates, are often created with one philanthropic goal
in mind. However, as the grantors often realize, establishing your own
foundation can often make smart money sense, as well.

Plus,
your last name does not have to be Rockefeller or Getty to start your
own.

The
Role of the Foundation

A
Private Family Foundation (PFF) is a separate entity, privately
funded by you. It is created with the specific purpose of contributing
to various charitable causes.

As a distinct, legal
entity, The Private Family Foundation:

1. Contributes
to a charitable cause and takes a tax deduction, while relinquishing
personal control over your gift.

2. Minimizes
your estate tax liability.

3. Avoids capital
gains tax on the sale of appreciated property contributed to the charity
of your choice.

4. Provides continuing
employment and activity for your family members.

5. Identifies
and preserves your family name for years to come.

Create
and Control Your PFF

Any
Private Family Foundation must be created with a charitable "intent."
The Foundation is managed by a trustee or executive director that oversees
the Foundation's investments and distributes the Foundation's assets.

You can even appoint
yourself as the trustee of your own Foundation. This way, you maintain
control over the assets contained in the Foundation. Instead of making
a one-time gift to a public charity (and losing control of that gift),
you can monitor your favorite charities. If one non-profit changes its
focus, or if a more meaningful cause comes along, you can reallocate your
Foundation's support.

Special
Tax Advantages

Private
Family Foundations have special tax advantages, because they are considered
"charitable organizations" themselves. Because of this classification,
any earnings on Foundation assets are tax-exempt, and can be distribute
to the charities you choose.

If
established properly, a private family foundation can often avoid capital
gains taxes on highly-appreciated assets (see below). In addition, interest
and investment earnings that are not slapped with an income tax can instead
be used to help the charities or causes you support.

Immediate
Tax Benefits for You

If
you have highly-appreciated assets that you're holding to avoid steep
capital gains taxes, a Private Family Foundation could help. Any appreciated
assets that you transfer to a Private Family Foundation can be sold by
the Foundation with no capital gains taxes. This is because of the Foundation's
charitable status.

Second, you can get
an immediate tax deduction for any money or property to grant to the Foundation.
This deduction can equal up to 30% of your adjusted gross income (20%
for appreciated property). Any income tax deduction not used in your contribution
year may be carried forward over the next five years.

The valuation of these
deductions depends on a number of things, including original cost and
the type of property being transferred. (For more information on valuation,
please request the PFF
Special Report.)

Estate
Tax Benefits

Every
dollar that you contribute to your Private Family Foundation means
one less dollar that is included in your estate. Gifts that are regularly
made to charities can instead be used to fund your PFF. And if you
are in a higher tax bracket, that could ultimately save up to 46%
in estate
taxes.

Best
of all, you can make such contributions to a Private Family Foundation
without affecting the $12,000 annual gift
tax exclusion or the current $1 million Gift Tax Credit .

Required
Distributions to Charities

Private Family
Foundations have certain laws they must abide by, because they are a legal
entity. For instance, by law, a Private Family Foundation must distribute
at least five percent (5%) of its assets each year to public charities.

Let's suppose you
leave $2,000,000 to your Private Family Foundation. The IRS says you must
distribute at least $100,000 (or 5%) to recognized charities in order
for the Foundation to qualify for its special tax advantages. Of course,
you can select a higher payout if you choose. But five percent is the
absolute minimum.

The annual payout
is established when you first sit down with a qualified estate attorney
who has experience working with large estates. And the difference between
what the assets earn (e.g. 6% per year) and the mandatory payout can be
put back into the Foundation.

Employment for the Family

You
may arrange for your heirs and descendants to receive salaries as "employees"
of your Foundation. Simply name family members as replacement trustees
to succeed you after death or resignation.

Many Foundations pay
their directors using the difference between their required distributions
and their annual income. If your Foundation is earning 10% annually on
its assets, but only paying 5% annually to charities, the difference can
be distribute for legitimate expenses, including salaries for the directors
of the Foundation.

Ensuring
Kids Don't Lose Out

While
charities will definitely benefit from your Foundation, your children
are deprived of the donated assets, after estate taxes are accounted for.
To remedy this situation, some individuals also choose to establish a
generation-skipping dynasty
trust (like The Legacy Trust)
to avoid estate taxes for up to three generations.

The
Legacy Trust, which is an advanced type of dynasty trust, also acts
as a shield for assets (subject to variations in state law). When properly
drafted and implemented, the Legacy Trust can also help place assets outside
your estate, outside the reach of creditors, judgments, malpractice and
divorce.

The Legacy Trust can
also provide a substantial benefit for your heirs, particularly through
the use of cash-rich life insurance. After funding The Legacy Trust with
annual gifts, it can purchase insurance payable to your heirs (as beneficiaries
of The Legacy Trust). The children would then receive a lump-sum when
you pass away, or you could have The Legacy Trust support grandchildren
(or even great-grandchildren). All of these benefits are usually 100%
estate tax- and income tax-free if structured properly.

Foundations
and Charitable Trusts

Private
Family Foundations can also be combined with Charitable
Remainder
and Charitable
Lead Trusts.
By doing so, you may able to draw a significant income for your lifetimes
and earn significant tax savings, while still maintaining a large degree
of control of your assets.

As
with any estate planning strategy, there are drawbacks. There are up-front
legal costs that make it prohibitive for many estates under $2-3 million.

Your Private Family
Foundation must also be legitimate, like a real business. You must keep
books and records to show how you arrived at your decisions, and establish
strict rules prohibiting self-dealing. Salaries must be earned, with enough
documentation to show that work was actually performed.

There are also potential
excise taxes, and significant penalties if the minimum 5% annual distribution
is not adhered to. Nonetheless, after seeking professional tax advice,
you may be able to meet your objectives through your own Private Family
Foundation.

Order
A FREE Special Report!

Private
Family Foundations are NOT for everyone. They must be drafted by
an experienced estate planning attorney, require a certain level
of financial commitment, and involve risks in certain situations.

However,
if you have charitable intent and wish to continue the family name
through a living entity, you should consider the prospect of establishing
your own Foundation.

To
order the Private Family Foundation Special Report, contact
SaveWealth.com. Your request is strictly confidential, and
provided without obligation.